Following the earnings miss reported by the oil and gas pipeline operator, Buckeye Partners, L.P. BPL, its units showed a downward movement of nearly 0.3% in the last trading session.
The partnership reported second-quarter 2015 earnings from continuing operations of 78 cents per unit, lagging the Zacks Consensus Estimate of 83 cents by 6%. On a year-over-year basis, earnings increased 47.2%.
Total Revenue
In the quarter under review, Buckeye Partners’ total revenues were $796.8 million, way below the Zacks Consensus Estimate of $1,183 million by 32.7%. The top line also plunged nearly 56% year over year.
Total revenues declined primarily due to a weak contribution from the Merchant Services segment, partially offset by higher contributions from Global Marine Terminals.
Operational Highlights
In the second quarter, the partnership’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations increased 36.9% year over year to $206.5 million.
Total costs and expenses were $665.8 million, down almost 61% from prior-year expenses. The partnership managed to cut overall costs primarily due to cost savings at Merchant Services.
The partnership’s operating income increased 28.2% to nearly $131 million from $102.2 million a year ago.
Interest and debt expenses during the quarter remained relatively flat year over year at nearly $42 million.
Financial Screening
As of Jun 30, 2015, Buckeye Partners had cash and cash equivalents of $8.6 million compared with $8.2 million as of Dec 31, 2014.
Long-term debt, as of Jun 30, 2015, was $3,574.6 million, slightly up from $3,389 million as of Dec 31, 2014.
During the quarter, capital expenditures surged 79.4% to $164.4 million from $91.7 million in the prior year.
Cash Distribution Update
The partnership has announced a second-quarter 2015 cash distribution of $1.1625 per limited partner unit, up 4.5% from the prior-year payout of $1.1125 and 1.1% higher than the first-quarter payout of $1.15. This will be paid on Aug 17, 2015, to unitholders of record as of Aug 10.
Upcoming Peer Releases
ONEOK Partners, L.P. OKS is slated to report second-quarter 2015 results on Aug 4, 2015. The Zacks Consensus Estimate is at 35 cents per share.
Plains All American Pipeline, L.P. PAA is expected to report second-quarter 2015 results on Aug 4. The Zacks Consensus Estimate is at 25 cents per share.
Magellan Midstream Partners LP MMP is expected to report second-quarter 2015 results on Aug 6. The Zacks Consensus Estimate is pegged at 73 cents per share.
Our View
Buckeye Partners’ quarterly earnings missed the Zacks Consensus Estimate but increased year over year. The partnership managed to sail through the stormy price environment in the second quarter due to its diverse assets and cost cutting efforts.
The partnership is on track with a number of organic projects in the New York Harbor, the Caribbean and Gulf Coast. Once completed, these projects will augment distributable cash flow through long-term customer commitments.
However, Buckeye Partners like other oil and gas players is expected to continue to be affected by declining crude oil prices.
Buckeye Partners currently carries a Zacks Rank #2 (Buy).
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